Russia's Foreign Ministry has said it is baffled by Barack Obama's suggestion it is not co-operating with the international investigation into what brought down Malaysia Airlines flight MH17.

Moscow was responding to Mr Obama's claim it has a direct responsibility to coerce pro-Russian separatists in Ukraine not to block the investigation.

"The words of US President Obama that Russia is not co-operating with an international investigation into the catastrophe of the Malaysian Boeing cause confusion," the ministry said in a statement.

MH17 crashed in east Ukraine killing all 283 passengers and 15 crew. The aircraft was believed to have been shot down by a surface-to-air missile fired by pro-Russian separatists.

Moscow's statement came as it also dismissed Western sanctions over the separatist crisis in Ukraine - said to be the toughest punitive measures against the Kremlin since the Cold War.

Since February, pro-Russian and anti-government groups have been fighting a violent struggle to keep the country allied to Moscow following the ousting of former President Viktor Yanukovych.

Image Caption:MH17 is believed to have been shot down by pro-Russian separatists

The latest US and EU sanctions target Russia's financial, arms and energy sectors in an attempt to compel Moscow to break off support for the rebels.

But Russia's First Deputy Prime Minister, Igor Shuvalov, made light of the restrictions, which are also supposed to hit oligarchs in President Vladimir Putin's inner circle.

"And what about the sanctions? In for a penny, in for a pound," he said, hinting Moscow was determined to see things through.

Although some financial institutions are putting on a brave face by declaring they would not be affected by the measures, a top Russian official attacked the US President.

"Obama will go down in history not as a peacemaker - everyone has already forgotten about his Nobel Peace Prize - but as a US president who started a new Cold War," said Alexei Pushkov, chairman of Russia's foreign affairs committee.

Economists have warned that Europe's economy would also suffer from the so-called sector sanctions against its biggest source of energy and its major trading partner.